In economic parlance, this is generally understood to mean a significant difference between the current market price of an asset and its actual value. In other words, a price is formed that cannot be rationally explained by normal, usual, regular supply and demand conditions in the respective market. – A sign for the emergence of a bubble are moderately (modest), but steadily (steadily) rising prices with growing trading volumes. If prices rise modestly but steadily, this encourages market participants to believe that the price increase corresponds to an increase in the asset value of the underlying asset. This in turn triggers rising sales of the asset in question. By contrast, erratic price increases tend to be seen as signs of speculation and, as a rule, tend to argue against the emergence of a bubble. – See algorithmic trading, buying up, central bank, bubble, speculative, stock market sentiment, cleaning up after, dotcom bubble, Jackson Hole consensus, leaning against the wind, Martin principle, reserve requirement, commodity bubble, tangible asset, asset value, exuberance, unreasonable, asset bubble, asset value. – Cf. ECB Monthly Bulletin, November 2010, pp. 75 ff. (ways in which monetary policy can avoid bubbles; many overviews).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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